Social Security raises to be thin

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Social Security raises to be thin
AARP projects cost-of-living increase at 2%

By David McNaughton , The Atlanta Journal-Constitution

October 9, 2003

Steward Sparks and 47 million other older Americans are bracing for news on the latest annual increase in Social Security benefits, starting in January.

AARP, the Washington-based organization that represents the 50-and-up crowd, expects an increase of about 2 percent when the annual cost-of-living hike is announced next Thursday.

If that is accurate, it would be the third-lowest boost in 15 years.

And it sounds meager to Sparks , a 76-year-old who lives in Fayetteville and still works part time as a forensic document examiner.

"It gives a whole new meaning to the word minuscule," said Sparks .

A 2 percent increase would mean about $10 a month extra to anyone now getting a Social Security check for $500, and $20 more for someone receiving $1,000 per month. The average monthly check this year is $895.

Sparks , a model-train buff with a room-sized layout of tracks, was hard put to find anything in his hobby collection that could be bought for $20. For he and his wife, Betty, the cost-of-living adjustment, or COLA, won't make much difference, Sparks acknowledged.

But for other Social Security recipients, every penny can count, according to AARP.

"Certainly for low-income people, who depend on every dollar of that COLA, it's very crucial," said Evelyn Morton, who works on legislative issues for AARP. "The COLAs have been largely responsible for reducing poverty among the elderly."

About 20 percent of all Social Security recipients have no other income, according to the Social Security Administration.

Social Security and Supplemental Security Income benefits are adjusted annually, based on the change in inflation from July through September of one year, from the same three months the previous year. Last's year hike was 1.4 percent, the lowest in four years.

Small increases in Social Security won't go far to counter fast-rising health care costs for retirees.

"That's the big issue," Sparks said.

James Nason, an economist at the Federal Reserve Bank of Atlanta , said the Consumer Price Index -- upon which the Social Security benefit increase is based -- doesn't reflect the costs of the elderly. And that punishes older Americans.

"The elderly have a different consumptions basket" than younger Americans, Nason noted. "They are going to be spending a lot more of their budget on medical care."

According to AARP, prescription drug prices are rising much more quickly than overall inflation.

"It's not an accident that one of the major policy issues is [over] buying pharmaceuticals from Canada ," said Nason.

That's how Sparks is fighting rising costs. He said he orders what drugs he can from Canada , and saves 30 percent to 40 percent on those.

He'd like to see Congress resolve the debate over a prescription drug benefit program, so he has access to "reasonably priced" drugs. But Sparks admits it's tough issue to resolve.

"There are no simplistic answers to this," he said.